Risk in Foreign Ownership of Transportation Infrastructure

The Reason Foundation estimates that States of the Union are facing a $9
billion a year shortfall to deal with infrastructure, mainly roads.
Governors aren't sure what to do about the problem. The public is
intolerant when it comes to raising taxes. From the public's point of
view, tolls are taxes, so raising tolls is also politically radioactive.
As a consequence more and more Governors are turning to so-called
private/public investments. The latest to turn to this "solution" is
Pennsylvania's Governor Edward G. (Ed) Rendell. At least he has been
popular. But what of his announcement that the Albertis Group of Spain
was the winner of major competition to lease portions of the
Pennsylvania Turnpike? The multiyear lease could bring in as much as $18
billion, depending on how much of the Turnpike is leased.

It would appear that the public does not like private interests' leasing
infrastructure. When the leasing agent is from a foreign country the
opposition goes off the charts. When the National Surface Transportation
Policy and Revenue Study Commission, upon which I served, took up the
question of private/public investments the recommendation only passed
when Commissioners agreed that no foreign government or private
consortium should be the leasing agent. In other words, if states are to
make a deal let it be with fellow Americans and not a foreign country.

The public, having paid for the building of toll roads, feels as if they
own these facilities and they just intensely dislike foreign entities
owning them. One libertarian economist who favors such partnerships said
when asked about public reaction, "Well, if it gets to be a problem we
can always nationalize the facility. I suppose so but that is highly
unlikely to happen, especially when the United States would then be
nationalizing facilities belonging to an ally. Or if an ally becomes an
enemy, then what? Do we want enemies holding key properties in this
country?

The problem is not simple. Revenues from the highway trust fund are
declining and will be out of money in only a few years. And as people
drive less (this last Memorial Day we saw the first decline in people
going on trips since 9/11) tolls produce less revenue. If a
private/public partnership owns the toll road it can raise tolls any
time without public hearings and without being subject to the political
pressure that any current plan to raise tolls would have.